Question

Your client just won the lottery and has the option of receiving $1 million today or...

Your client just won the lottery and has the option of receiving $1 million today or $100,000 per year for 20 years. What is your recommendation assuming a 9% discount rate? What is your recommendation assuming a 7% discount rate?

Choose one answer.

Take the $1 million payout if the discount rate is 9%; take the annuity payout if 7% is the discount rate

Take the $100,000 annuity payout in either discount rate scenario

Take the $1 million payout in either discount rate scenario

Take the annuity payout if the discount rate is 9% take the $1 million payout if the discount rate is 7%
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Answer #1

Take the $1 million payout if the discount rate is 9%; take the annuity payout if 7% is the discount rate

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